The California Contractors State License Board requires that all contractors living in the state must have a license bond before they can perform any construction within the state. Now, you may be wondering why this rule exists before starting a project.
This license is considered as a protection to customers against inexperienced contractors. This will serve as a cushion for the consumers as it ensures that the contractor has met the contractual obligations, which include quality workmanship, the ability to complete the project and many more.
These bonds are not only beneficial to the consumers but the contractors as well, this article will highlight some of the benefits of having a California contractor bond.
Why Is a License Bond Required?
Contractor license bonds are legal contracts created to protect the public by ensuring and guaranteeing that contractors will follow all state rules and regulations as written in the California Business & Professions code or risk a bond payout, which, aside from leading to financial loss, can cause disciplinary action by the CSLB.
Click here to learn about California’s business & professions code.
Contractors that are not licensed are not bonded to this therefore, they don’t offer the same level of financial protection to customers. Every year, the California Contractors License Board receives countless complaints from people concerning unlicensed contractors, and they always prepare sting operations to hold and prosecute the offenders. Here are some of the benefits of having a California contractor bond.
Prevents Penalties
One of the main reasons for having a license is to avoid the penalties that come with practicing this profession without a license bond. Most times, you will discover that most of these industries, especially contractions, require you to be bonded to practice successfully. Failure to work with this bond is illegal, and you may face criminal charges and hefty fines along the way.
Customer Confidence
Clients are naturally wary, especially when dealing with new contractors for their projects, considering the increase in fraud levels. However, if you are bonded, this will increase your client’s confidence level because they know they can hold your company accountable in case of any misdeeds or nonperformance. What’s more, they know that they won’t be risking losing a hefty amount if you fail to fulfil your promise.
Reduces Unqualified Competition
Before a contractor is issued a license bond, they must go through a review process that will analyze their financial health, performance, qualifications and many more. Applicants who have a poor credit history, are not qualified or even have a questionable history will have a hard time obtaining a bond. It’s through the bonding process that contractors can benefit since the competition will be reduced.
Stakeholder Protection
The California contractor bond protects not only the contractor and the client but also the interests of every party involved in the contract. This way, everybody, whether it’s the suppliers, workers, or contractors, will be assured that they will receive their payment since the contract is bonded and will ensure the payment is secured. As the contractor, you will benefit from this because you won’t experience the challenge of finding third parties that will work for you.
Safety
Safety is among the top benefits that contractors will enjoy when they have the California contractor bond. This will protect them from rogue clients. The band will perform like a double-edged sword by providing a defense from false claims against the company. In fact, a California contractors license bond will serve as a clear-cut that represents if a claim is launched against you and might even favor you as long as you didn’t breach the contract. In general, signing the indemnity agreement involves trust and responsibility as it covers everybody involved.
Financial Benefits
The California contractor bond has many financial benefits to your company. It provides funding flexibility by offering contractors the option to set up a different credit line with third parties. In some cases, the bonds can be considered collateral when requesting a loan; through this, they will remove growth restraint, enhance better cash flow and free up essential working funds.
Open New Opportunities
Whether you are in the construction industry or any other field, having your company bonded will create room for many business opportunities because you have showcased your financial strength and ethical standards in business.
Read https://www.linkedin.com/pulse/how-get-contractors-license-california-jason-fairbanks?utm_source=share&utm_medium=member_android&utm_campaign=share_via on how to get a contractor license in California
Conclusion
Most people think obtaining the California contractor bond will benefit the client, but the truth is, as the contractor, you will also enjoy many perks from it. First, it prevents you from penalties, reduces unqualified competition, provides you with safety and financial benefits and creates room for many new opportunities. Therefore, if you are skeptical about this license, this article should serve as a reason to obtain it as quickly as you can.
